The pound was steady against both the euro and US dollar on Friday as the much awaited rescue package of Ireland failed to materialise but has fallen this morning when the European markets reopened after the weekend announcement of an up to €90 bn recue package for the stricken Irish economy, the second European bail out in 6 months after the rescue of Greece in May.
The bond markets also welcomed the Irish Republic’s bail out news, with yields on Irish bonds falling below 8%.
In a quiet news day for the UK economy, UK banks and building societies have advised that they do not expect any significant recovery in mortgage lending next year in the UK.
A new vetting process for mortgages could “cement in place restricted… lending”, denying many the chance to buy the homes they want, they added.
The warning comes after figures showed new mortgages last month, at £12.4bn, were the lowest for a decade.
First time buyers are most affected by the lending drought.
Mortgage lending is barely a third of the level of three years ago.
For first time buyers, many who could easily afford the monthly payments on a mortgage are prevented from buying because deposits are so high, he added.
The average down payment for new buyers is 24% of the price.
With key data about the performance of the UK economy over the three months to September 2010 due out on Wednesday, the long expected retracement of the pound against the Euro once the Irish recue is in place could accelerate if Wednesday’s data confirms a slowdown in economic activity in the UK.
The US dollar fell as China’s main economic planning agency moved to reassure people who fear inflation is getting out of control.
The National Development and Reform Commission (NDRC) said in a statement that the country had “the capacity” to keep prices in check.
There is particular concern about food price inflation, amid suggestions that some people are hoarding commodities.
The muted markets also allowed the pound to pick up against the so called high yielding currencies like the Australian and New Zealand dollars and South African Rand.
